[T]he “endowment effect” […] explains our irrational tendency to overvalue something just because we own it. Or, as Thaler puts it, “goods [that] are included in the individual’s endowment will be more highly valued than those not held in the endowment, ceteris paribus.”
In the last few years some psychologists have pointed out that the endowment effect results not from loss aversion but from a sense of possession, a feeling that an object is “mine.”
Riffing on the findings produced by Morewedge, Maddux and other researchers, Dommer and Swaminathan posit that, “loss aversion has typically accounted for the endowment effect, but an alternative explanation suggests ownership creates an association between the item and the self, and this possession-self link increases the value of the good.”
The takeaway is obvious enough. We humans are not perfect calculators. Instead, we overvalue our possessions because they contribute to our identity and the identities of the groups we belong to. We don’t overvalue goods because we’re loss averse; we overvalue goods because they are part of who we are.